Rajaratnam Trial: Govt. Closes on 'Overwhelming' Evidence

EDITOR'S NOTE: This story has been updated with the beginning ofdefense closing arguments.

NEW YORK (Reuters) - wanted to "conquer the stock market at theexpense of the law," a U.S. prosecutor said in closing arguments ofthe hedge fund manager's insider trading trial on Wednesday [April20].

But a lawyer for thefounder countered in his summation that "thegovernment's narrow view is very unfair" and Mr. Rajaratnam actedlegally in seeking out information about investments on behalf ofhis customers.

As the six-week trial wound toward a conclusion, the voice of Mr.Rajaratnam rumbled repeatedly over speakers in a New York courtroomas prosecutor Reed Brodsky replayed excerpts of phone taps to remindthe jury that the defendant timed his stock trades, sometimesseconds after learning corporate secrets.

"You heard the defendant committing his crimes time and timeagain in his own words," Mr. Brodsky told the jury in 4-1/2 hours ofsumming up the government's evidence that Mr. Rajaratnam made anillicit $63.8 million between 2003 and March 2009.

He said the case, built in part on trial testimony from threecooperating witnesses, demonstrated "overwhelming" evidence of Mr.Rajaratnam's guilt in the government's biggest probe of insidertrading at hedge funds.

In contrast, chief defense lawyer John Dowd said the testimonyfrom these witnesses was "unreliable and worthless." Mr. Dowd alsosaid the government failed to make its case.

"The government's case rests on the fictional idea that companyinformation cannot become public until a company issues a pressrelease," Mr. Dowd said. "This is not the real world."

Later he told the jury, "If it's public, you must acquit."

Mr. Rajaratnam, a 53-year-old one-time billionaire, is thecentral figure in a sweeping U.S. government probe of insidertrading at hedge funds, and the only defendant so far to go ontrial. If convicted, he could face up to 25 years in prison.

The Sri Lankan-born defendant faces securities fraud andconspiracy charges relating to secrets about earnings or acquisitionactivity involving more than a dozen companies such as chipmakersAdvanced Micro Devices Inc. and Intel Corp., and Internet searchcompany Google Inc.

Mr. Dowd spoke for about one hour, and is expected to continuehis closing statement on Thursday [April 21]. The jury could startdeliberations later that day or on Monday [April 25]. Court is notexpected to be in session on Friday [April 22], which is GoodFriday.

(See the Reuters Insider take on this story. See a chart of theGalleon Group case.)

Mr. Rajaratnam sat expressionless in a crowded courtroom,surrounded by at least 10 lawyers and a few friends, as Mr. Brodskyemphasized signature pieces of evidence against him. Mr. Brodskysaid Mr. Rajaratnam tried to cover up illegal trades with e-mailtrails and patterns of buying and selling stocks.

"The defendant's insider trading scheme helped him pad hisprofits that kept him at the top in a game to be the best, andconquer the stock market at the expense of the law," Mr. Brodskytold the 12 jurors and four alternates.

Mr. Brodsky said Mr. Rajaratnam orchestrated several conspiraciesto get tips, including one involving, a former worldwide managingdirector at consultancy McKinsey & Co. who also sat on the board ofGoldman Sachs Group Inc.

Recallingfrom Goldman Chief Executive Lloyd Blankfein, Mr.Brodsky said Mr. Gupta repeatedly told Mr. Rajaratnam about the WallStreet bank's private board discussions. Within seconds of hearing"great news" from Mr. Gupta in September 2008, which turned out tobe a critical $5 billion investment in Goldman by Warren Buffett'sBerkshire Hathaway Inc., Mr. Rajaratnam bought 217,000 of the bank'sshares, Mr. Brodsky said.

Then, that October, he learned from Mr. Gupta that Goldman wouldsuffer its first quarterly loss as a public company, Mr. Brodskysaid, and Mr. Rajaratnam sold his Goldman stake first thing the nextmorning. The loss became public in December.

"There's no other rational explanation for the timing of thecalls, the timing of the trades," Mr. Brodsky said. "Those calls sayit all."

Mr. Brodsky also reminded jurors of the testimony of witnesseswho admitted conspiring with Mr. Rajaratnam. These included formerMcKinsey partner, former Intel Corp. executiveand former Galleonportfolio manager.

"Corrupting his friends and his employees, he gained access tosecret information to gain an advantage over ordinary investors inthe stock market," Mr. Brodsky said. "The defendant knew tomorrow'snews today, and that meant big money."

To convict, the government must convince jurors beyond areasonable doubt that Mr. Rajaratnam received material nonpublicinformation from people who had a duty not to disclose it, and thathe knew it was wrong to trade on it.

Messrs. Kumar, Goel, Smith and formertrader, all featured onphone taps, are among 19 people to plead guilty out of 26 charged inthe broad Galleon case.

The case is USA v Raj Rajaratnam et al, case No. 09-01184, inU.S. District Court for the Southern District of New York.

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